My Article About Free Money The late-night TV infomercial is so alluring: "Come to our seminar and come across out how you may get your government grant to start off a smaller business enterprise!" a breathless announcer intones. "Just $300." A smiling entrepreneur assures in a taped testimonial: "I got $40,000 for my little company!"
The bright, red words: "
Free Money!" fill the screen. It's an old story, and 1 that makes small-business consultants, counselors, and advice columnists (this a single included) cringe. Whenever such ads run, we brace ourselves for calls and e-mail from business owners and would-be business owners who can't wait to get their hands on that free of charge authorities cash - which does not exist. Why are individuals who supposedly wish to be hard-headed, no-nonsense enterprise kinds so gullible? This is really a subject the Smart Answers column has addressed before, but I periodically revisit it. That is mainly because these aren't harmless hoaxes. Seminar sellers and guide hucksters routinely con folks into shelling out hundreds of dollars to hear lectures or buy directories that contain info readily readily available (yes, truly totally free!) in any public library or on the internet.
"I've been working in small-business advancement for 16 years, and this urban legend by no means goes away," sighs John Rooney, a professor on the Lloyd Greif Center for Entrepreneurial Studies on the University of Southern California. "Interest and calls peak when some new ebook or ad kicks in."
"BRIGHTEST TECH MINDS." Typical sense as well as the most basic awareness of enterprise principles need to tell business owners that no one particular besides Mom and Dad (maybe) will give you no-strings funds to start off a for-profit organization. "If the govt was within the position of providing all of the funds totally free to men and women who commence their own organizations, we wouldn't last prolonged," says Mike Stamler, a spokesman for the U.S. Small Organization Administration in Washington, D.C. "Not to mention that the American folks would in no way stand for the federal government setting individuals up in enterprise at no cost, and all at taxpayer risk."
Yet, the myth persists. Like most con artists, the free-money hucksters take a grain of truth and distort it. You will find a few highly particular grants for little companies. A look in the details shows the cash is hardly free of charge. It comes with a host of restrictions and quid pro quos. For instance, some local agencies give modest grants to companies that locate in poor areas and guarantee jobs to people today in an underemployed community, says Phil Borden, director from the Women's Enterprise Advancement Corp., a Lengthy Beach (Calif.) nonprofit organization assistance center.
You can find also some extremely restrictive, difficult-to-obtain grants given to tiny enterprises to analysis new technologies for the federal government. "There is something known as the Modest Business enterprise Innovative Study (SBIR) program that gives business owners up to $100,000 to investigation an idea that's considered promising and as much as $1 million to create products from it, if the analysis pans out," Borden explains. "The issue is, the promising ideas have to do with things like how you can capture a satellite in orbit and repair it. The folks who compete with intricate, detailed proposals for these grants are experts in engineering and science and have the brightest technology minds in the country. The notion that this type of income is available to folks off the street is usually a joke."
Ready VICTIMS. Still, the free-money hucksters locate prepared victims mainly because people today wish to believe there's a way around the difficult work of raising capital. "So several men and women say they heard it from a friend or saw it on TV. Of course, they've never truly met anybody who got any totally free funds. It becomes like the Holy Grail of little organization, and a great deal of business owners get caught up in this notion that it is out there," Rooney says.
The true believers are amazingly persistent. "About six or eight years ago, there was a scam like this that produced a run of calls," says the SBA's Stamler. "The huckster on the heart of it implied that these grants were there, but the authorities didn't need to let everyone know about them," Stamler recalls. "He told folks not to take 'no' for an answer when they referred to as us."
Rooney says he once ordered a "free-money" ebook advertised on television.The author claimed each and every entrepreneur was entitled to a federal government grant. Rooney received a directory of farmer's subsidies, Housing & Urban Development programs, and government-loan applications.
What about those testimonials from happy business owners? Listen closely, Stamler says. They usually say they "got" so much authorities income for their modest enterprise - they don't say how. Most of those featured business owners have gotten small-business loans, he says. The SBA guaranteed more than $16 billion in loans during fiscal 1999 through its three major financing programs.
LEGITIMATE SOURCES. The irony is that in this boom time for modest organization, you will discover many sources of loans or equity financing for startups. "Money's not that challenging to get from friends and family if you've got a genuinely good thought," says Rooney. "I've seen college students raise millions with their dot.com ideas. Why waste your time with the snake-oil salesmen when you could be talking to professionals who know what they're doing?" After all, it's not as though the average startup needs quite a few millions to get off the ground.
As Jim Weidman, spokesman for the National Federation of Independent Company points out: "Most new organizations are started with a quite little amount of dollars, around $5,000. So folks come up with it out of their personal savings or borrowing from their relatives, unless they are buying an ongoing enterprise or starting a enterprise that needs a lot of initial funding for inventory, working capital, or buying or leasing a building."